In the past 12 months, larger tech companies have invested almost $120 Bn in cloud computing. And this has yielded results on a scale unimaginable a few years back. Though the pandemic played an important trigger in acceptance of it by the large clients. There was still resistance from the financial sectors for it.
But the past few months have shown a big reversal in the trend. Google signed up a deal with CME the largest commodity exchange and Amazon signed with Nasdaq and NYSE for the market data. These are trillions of dollars of trade information that will be driven by cloud computing.
These trends have also led banks to start shifting to the cloud. Morgan Stanley and HSBC have already signed deals to transfer core operations to the cloud. This will bring a large transformation to the financial sector spending on technology. And this directly impacts the Indian firms that gain the largest share of it.
The problem for these plays is not an immediate threat but comparing the number of dollars that are being invested by US tech giants the market share maintainability and gains would be an expensive affair.
Though the traditional revenues do not get hurt the new business, especially of large clients is going to see margin sacrifice on competition intensity. And this would bring talent and expense issues to a new level for these companies.
From the investor's perspective, the new business value should be discounted at a higher rate and the sector should be seen from the perspective of cash returns rather than stock appreciation.